Example of economic order quantity, Cost Accounting

Example of Economic Order Quantity

The EOQ model supposes:

- Annual demand is recognized

- Hold costs are constant and recognized

- Ordering costs are recognized and constant

- The same quantity is ordered every instance an order is made as demand as assumed not to fluctuate considerably.

Example

ABC Ltd has an aggregate demand of 1.2 Million units. All time they put an order there is an ordering cost of shs 1,000, holding cost is shs 100 per unit. Find out:

i. EOQ

ii. No. of order to be made based EOQ

iii. Net cost of stocks based on the EOQ

Solution

EOQ = √(aDCo/Ch)

= (2 x 1200000 x 1000)/100

= 489 units

i) No of order = 1200000/4899

= 244.9

≈ 245 Orders

ii) Net cost = DCo/Q + (½ QCh)

                  = 1200000 (1000) /4899 + ½ (4899)100 = 489,900

Posted Date: 2/5/2013 5:20:27 AM | Location : United States







Related Discussions:- Example of economic order quantity, Assignment Help, Ask Question on Example of economic order quantity, Get Answer, Expert's Help, Example of economic order quantity Discussions

Write discussion on Example of economic order quantity
Your posts are moderated
Related Questions

explain the different methods of costing

Q. Why communities begin using FCA? There are several reasons why communities start by means of FCA. For instance: • To elucidate more evidently MSW costs to people. • It is

MLC, which was established in year 1998, manufactures a range of garden sheds and summerhouses using timber purchased from a various suppliers.The recently appointed managing direc

1. Pardee Company plans to sell 12,000 units during the month of August. If the company has 2,500 units on hand at the start of the month, and plans to have 2,000 units on hand at

Seventeen new bathing suit stores enter the Santa Barbara market, joining the seven that already existed. As a consequence, the demand schedule facing Swim N Style (and all other s

Bubba's Crawfish Processing Company uses a traditional overhead allocation based on direct labor hours. For the current year, overhead is estimated at $1,150,000, and direct labor



Download the financials of Shoprite , study them, then, using ratio analysis, the cash flow statement, and the segmental breakdown of the results, prepare a statement outlining the